5 Big Questions Surrounding the 2013 Cotton Crop

What's in store this year for the nation's cotton producers?

With planting season beginning soon, a few big unknowns hang over the heads of the nation’s cotton producers, who came this week to the annual Beltwide Cotton Conferences (BWCC) in San Antonio looking for answers.

Several of these questions, of course, are perennial. It’s anyone’s guess when cooperative weather and cotton production ambitions will be in sync. And it’s rarely certain just how effective weed-control efforts will be.

But some factors are becoming clearer as planting season approaches across the Cotton Belt. The Chinese government announced last Friday that it would begin drawing down on its immense cotton stocks, which has led to a three-day decline in cotton futures prices. And given the strength of competing corn and soybean prices, it’s a virtual lock that fewer acres will be planted in the United States this year.

How much acreage will be planted?

The futures market already anticipates a decline in acreage planted that could lower cotton planted acres by 2 million or more. The likelihood of reduced supply had buoyed cotton futures prices until last Friday, when China announced it would begin dipping into its cotton stocks at an unspecified time.

Presenting his outlook at BWCC, Gaylon Morgan of Texas A&M AgriLife Extension Service said that virtually every region is reporting a "significant decrease in cotton acres throughout the Cotton Belt—more significant in the Delta region, probably to a lesser degree in the Southwest.

"At the prices we’re looking at," he continued, "we’re going to have to continue to strive to find production efficiency in cotton, just to keep it competitive with the grain crops and the current grain crop prices."

What will happen to prices?

Most analysts were forecasting that cotton prices would rise this year based on constrained U.S. production. Sources contacted for AgWeb's 2013 cotton outlook predicted that prices would probably hold between 75¢ and 85¢.

But prices began falling on Friday, after the Wall Street Journal reported that China would draw down its surplus. China, the world’s No. 1 cotton consumer, began buying for its state reserve during the 2011/2012 marketing year. The country has at least 37.6 million bales of cotton in inventory.

China’s purchases are inflating prices worldwide. Estimates are that 25% of 2012/2013 world supplies are being held away from commercial channels. If the cotton were suddenly free to be traded, U.S. cotton prices could drop 30¢ per pound lower, says John Robinson, an agricultural economist with Texas A&M University.

How much cotton will the rest of the world want to consume?

The USDA recently increased its forecast for world usage. It also lowered its projection for world 2012 crop year ending stocks by 630,000 bales, bringing stock back down below 80 million bales. This was the first downward adjustment in a long time.

In comparison, two years ago global stocks were only 48.93 million bales. The big issue related to consumption is how much cotton China wants to buy, says Joe Nicosia of Louis Dreyfus Commodities. Nicosia said the fate of U.S. cotton produces hinges on what China does. "We need China to use more cotton," he says.

If China’s reserve buys more cotton, and if the government issues more import licenses, cotton prices will go up. "If China decides to pull back from the world marketplace, the question becomes, 'What’s the world going to do with its surpluses?'"

How will the weather affect cotton production?

Climatologist John Nielsen-Gammon of Texas A&M University took his best shot at forecasting the weather for the upcoming growing season, even though he says, "You can only forecast the weather for a week or so before randomness takes over."

Going through the many influences on weather patterns, Nielsen-Gammon says that ocean temperatures are the only reliable guides for what might happen in the next few years. And as long as the North Atlantic remains warm, the forecast calls for drier summers in the south central and southwest United States, a trend that may last for another decade.

"Both oceans are effectively working against us," says Nielsen-Gammon, showing NOAA forecasts for the next six months that called for below-normal precipitation. Noting that Texas had received some good rains recently, he said that there’s always the possibility of an upside surprise. "The weather has a mind of its own."

How will the crop stand up to weeds and insects?

Southern producers have been dealing with resistant weed species for years. The situation produced horror stories about the likelihood that resistant amaranthus species would someday infiltrate Texas, the top cotton-producing state. "I’m afraid at this point that someone let the boogey man out of the closet," said Paul Baumann, weed specialist for Texas A&M AgriLife Extension Service.

Relatively fertile conditions in Texas last year led to an outbreak of glyphosate-resistant common waterhemp in east central Texas and suspected Palmer amaranth resistance in northwestern counties of the state.

Texas A&M University has published best management practices, which "begins and ends with a soil-applied herbicide," Baumann said. Noting the ease with which certain weeds spread, he added, "We’re going to have to get off the tractor or the pickup and start chopping them down."